Factors Affecting Dividend Policy on Non-Financial Companies in Indonesia

Abstract

Objective - The objective of this study is to obtain empirical evidence and analyse the factors that affect the dividend policy of non-financial firms listed on the Indonesian Stock Exchange. The factors studied include liquidity, leverage, growth, price/earnings, size, earnings per share, price to book ratio, ownership, age of the firm, floating rate, profitability, and free cash flow. Methodology/Technique - The sampling method used in this study is purposive sampling, in which the samples are taken based on suitable characteristics of the population to generate representative samples. The total number of samples in this study are 105 non-financial firms listed on the Indonesian Stock Exchange between 2011 and 2015. The hypothesis is tested by using multiple regression analysis. Findings - The results of this study show that earnings per share, price to book ratio, and floating rate affect the dividends policy while liquidity, leverage, growth, price/earnings, size, ownership, age of the firm, profitability, and free cash flow has no effect on dividend policy. Novelty - The study findings contribute the companies to establish an appropriate dividend policy to satisfy the interest of both parties that is companies future growth and its investors. Type of Paper: Empirical Keywords: Dividend Policy; Price to Book Ratio; Ownership; Age of the Firm; Floating Rate; Free Cash Flow. JEL Classification: G32, G35, M41.